Strategy’s Golden Rule

The single most common competitive mistake investors, CEOs, and entrepreneurs alike make is this: striving to do slightly better what their fiercest rival already does incredibly well.

The result is usually a muddled, incoherent mess of a strategy — one that fuels not disruptive, explosive differences between a firm and its rivals, but their very opposite: bland, boring similarities.

Most companies are competitively challenged — and the Golden Rule of Strategy is how I triage them. It says: “What your fiercest rival does badly, do incredibly well.”

Consider an example. My Macbook Air recently developed the dreaded cracked hinge problem. Getting it fixed? A Kafkaesque task fit for an existential Hercules. First, I had to book an appointment at the Genius Bar, pointlessly delaying my repair by nearly a week. Then, the guy at the bar was less “genius” than the Steve Jobs control freak remix of Homeland Security. Barking at me, my interrogator began: had I dropped my laptop? Why were there scratches on it? Was I trying to pull the wool over Apple’s all-knowing Cyclopean eye? Half an hour of hardball later, he (very) grudgingly agreed: just this once, out of the kindness of its heart, Apple would fix my laptop — even though it was slightly beaten up. The magnanimity!

To put it kindly, Apple’s service stinks like a skunk trapped in an outhouse. For their competitors, that should be target, acquired: “What your fiercest rival does badly, do incredibly well.” But Apple’s rivals — Sony, Dell, Samsung — haven’t mastered the Golden Rule. They’re churning out Apple look-alikes and feel-alikes, trying to beat Apple at its own game — simple, usable, beautiful design — instead of changing the game. Dell, for example, has even worse service than Apple. Result? No brainer: uglier products + worse service = Apple wins. All should be applying the golden rule of strategy instead, and hitting Apple squarely in the pot-belly of poor service, where it’s soft, weak, and vulnerable.

In difference lie the seeds of disruption. In similarity, only obsolescence, and decay. As Michael Porter and Gary Hamel have both so eloquently discussed, the essence of strategy is discovering meaningful differences that make a firm inimitable, singular, and unique. Strategy’s cornerstone, that is how to build a disruptively different business.

To see its power, let’s apply the Golden Rule. What does the Golden Rule say in autos? Ford, Chrysler, and GM spent a decade trying to best another at churning out the biggest, hungriest SUV — but none tried to do what all sucked at: make a smaller, cheaper, more fuel efficient car instead. What does the Golden Rule say in food? Big Food has spent half a century trying to make food cheaper, with artificial flavors, colors, and ingredients — but none tried to do better what all sucked at: make food more nutritious instead. What does the Golden Rule say in media? Incumbents tried for decades to lock down content in walled gardens — but none tried to open it, unlock it, and free it.

Enter a new set of revolutionaries, wielding the Golden Rule like a superweapon. Who did well what auto incumbents did badly — making a smaller, more fuel efficient car? Tata, with its revolutionary Nano. Who did well what food incumbents did badly — delivering healthier food? Whole Foods. Who did well what media incumbents did badly — freeing and unlocking content, so it was easily discoverable? Google.

The Golden Rule is powerful because it’s like an economic electron microscope. It sees through overblown jargon, billion-slide presentations, endless meetings, pointy-haired consultants, evil bankers — straight to the beating heart of competition itself. When a firm employs the Golden Rule, it sees what’s missing in an industry, market, or sector. The result is a strategy with power, precision, and poise.

Lazy, indolent, entitled incumbents of the world, look out: the Golden Rule’s got your name written all over it. Consider the ultimate incumbent: America itself. What does the Golden Rule say for countries? America should do incredibly well what China does badly: make awesome stuff that’s meaningful to people, with love, justice, purity, and passion. That’s where the seeds of renewal really lie. But we’re not quite there yet.

For countries, companies, and people, a strategy that doesn’t challenge is like a bike with square wheels. It might get you where you want to go, eventually — but only in the slowest, hardest way possible.

Do you have what it takes? Are you attacking your rivals — or merely confronting them? Are you mastering strategy’s Golden Rule? Or will it master you?